Financial Markets…The euro weakened to a two-week low of $1.29 earlier Monday, and European benchmark stock index (Stoxx Europe 600) fell as much as 0.6%, amid political turbulence in Italy. Italian Prime Minister Mario Monti said on Saturday he intends to resign, sparking concerns over who will navigate the country’s efforts to reduce debt.

Italian government bonds dropped as well, pushing the benchmark 10-year note yields up by 35 basis points to 4.87%, following the Prime Minister’s announcement to quit. The country’s 2-year note yields rose 45 bps to 2.43%, after climbing as much as 49 bps earlier. In contrast, French, Belgian, and Austrian government bonds advanced, sending their 10-year rates to euro-era lows.

The Greek government extended the deadline for a bond buyback program, from last Friday to mid-day Tuesday, after the country was nearing its target amount with almost €30 billion offered. The successful buyback operation is seen as key to the country’s international aid. Under bailout terms agreed in November, Greece is supposed to repurchase about €30 billion of bonds in nominal value, which account for almost half of the €63 billion of Greek debt owned by private investors.High-income Economies…Germany’s exports rose 0.3% (m/m) in October following a 2.4% fall in September, as shipments to countries outside Europe offset weaker demand in the Euro Area. The increase in exports confirms earlier data on strengthening of foreign industrial orders. Sweden’s industrial production rose 0.5% (m/m) in October (-4.4% y/y), after falling 4.2% (m/m) in September. Swedish industrial orders in October were up 1.6% (m/m), led by a 3.2% increase in export orders, while domestic orders fell 0.5%.

France’s industrial production fell 0.7% (m/m) in October, a smaller monthly decline compared with a 2.7% fall recorded in September, as the economy continues to grapple with reducing the budget deficit and improving competitiveness. Despite the monthly moderation, on a year-on-basis industrial output fell at a faster 3.6% (y/y) in October compared with a 2% (y/y) decline in September.

Italy’s industrial production fell 1.1% (m/m) in October (-6.2% y/y), a slightly slower pace of decline than the 1.3% (m/m) fall recorded in September, while consumer confidence fell to its lowest in more than a decade in November.

Greek industrial production fell 6.5% (m/m) in October after rising 2.6% in September. Despite the monthly decline, output was 2% higher in October on a year-on-year basis due to base effects. Greece’s consumer price inflation fell to 1% (y/y) in November from 1.6% in October, reflecting weak demand.

Czech unemployment rate rose to 8.7% in October from 8.5% in September, while industrial production fell 0.7% (m/m) in October (-3.3% y/y). New industrial orders however rose 5.3% (y/y) led by a 6.4% increase in foreign orders.

The OECD’s composite leading indicator was unchanged at 100.2 for the fourth straight month, but the country-specific indicators showed diverging patterns, with growth in Germany, France and Spain expected to remain weak, activity in the US, UK, and China expected to pick up, and some tentative signs of stabilization of growth in India.Developing Economies…China’s industrial production growth accelerated to 10.1% (y/y) in November from 9.6% in October. China's retail sales also accelerated to 14.9% (y/y) in November from 14.5 percent in October. Both industrial production and retail sales performance were the strongest in November since March.

Inflation in China accelerated in November to 2% (y/y) from 1.7% in October reflecting an increase in specific food prices (vegetables) and a pick-up in economic activity. The producer price index decline slowed to 2.2% (y/y) in November from 2.8% in October. China’s fixed asset investment grew by 20.7% in the first eleven months of 2012 compared with the same period last year. The real estate market notched up a strong month with the sales of new homes growing by 9.1% in the first 11 months of the year, jumping 3.5% percentage points from a month earlier.China’s export growth accelerated on a monthly basis to 2.2% (m/m) in November compared to a 5.8% decline in October. Imports grew by 11.4% (m/m) in November. At the same time, on an annual basis, a 2.9% (y/y) export growth in November was slower than the 11.6% gain in October. Imports remained unchanged compared to a 2.4% (y/y) growth rate in October.

Turkey's GDP growth slowed to an annualized 0.8% (q/q) pace in the third quarter. On an annual basis, Turkey’s GDP expanded by 1.6% (y/y) in the third quarter of 2012, compared to a 3% growth recorded in the second quarter. Meanwhile industrial production in November dropped by 5.7% (y/y) in October reversing a 6.2% growth registered in September. On a monthly basis industrial production contracted by 2.6% (m/m) in October compared with a 3.9% growth in September.

Russia's central bank has kept its key refinancing rate unchanged at 8.25% on moderating inflation and weak economic activity, but raised its fixed-term deposit rate by 0.25 percentage points and simultaneously reduced the ruble swap rate by the same amount to narrow the interest rate band and reduce rate volatility. Russia’s annual inflation was unchanged at 6.5% (y/y) in November from October exceeding the government’s original forecast of 6.1 percent in 2012 but within the Central Bank’s revised 6.5-6.7% 2012 inflation target.

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